The dirtiest little legal secret in Second Life isn’t virtual escorts, illegal gambling, ponzi schemes, or even money laundering — the secret is this: misappropriation of major corporations’ trademarks in Second Life is so ubiquitous, so safe, and so immensely profitable, that it has become a wholly transparent part of Second Life’s bustling commercial landscape.

Here are a handful of numbers gathered May 4, 2007, that begin to illuminate the scope of the problem:

There are at least 16 shops in Second Life advertising “Ferrari” cars. One model sells for L$1995 (approximately US $7.75). Ferrari does not have an official presence in Second Life.

At least 40 stores in Second Life advertise virtual “Rolex” and “Chanel” watches, averaging around L$350 (US $1.61). Neither Rolex nor Chanel runs any of these stores.

There are more than 50 stores in Second Life carrying virtual sunglasses branded “Gucci,” “Prada,” “Rayban,” and “Oakley.” Each pair is priced around L$125 (US $0.75). None of these stores appears to be owned, sponsored, endorsed, or licensed by any of these companies.

The term “Gucci” alone generates 106 hits in Second Life classifieds, referring shoppers to stores selling virtual versions of nearly every hot product the company makes, including shoes, handbags, and clothing. “Vuitton” generates 39 hits. “Abercrombie” gets 30. “Timberland” gets 26. None of these stores appear to be affiliated with the company behind the name.

“Nike” holds the record, generating 186 hits, many of which link to stores where shoppers can find avatar shoes bearing the company’s distinctive swoosh. Nike itself does not sell any of these shoes.

Even geek-darling Apple isn’t immune. A half-dozen stores in Second Life sell virtual “iPods” for avatars. Some add copyright infringement, preloading the unlicensed “iPods” with songs from artists ranging from Michael Jackson to Gwen Stefani. Apple is not behind these stores.

Of ten randomly selected “shopping malls” found in Second Life’s classifieds, seven had stores selling goods that exhibited obvious trademark infringement. Several stores VB visited for this piece appeared to sell nothing but unlicensed brand-name goods.

This past March, about 11,500,000 transactions took place within Second Life. There’s no way to know exactly how many involved knock-off goods, but a quick overview of in-world shopping areas reveals that well over 1% (probably closer to 3-5%) of the goods for sale in-world carry unlicensed trademarks. For the sake of argument, let’s be conservative and say that about 1% of the transactions in-world involve unlicensed trademarks. That’s about 115,000 instances of profitable, in-world trademark infringement in March, 2007, alone. Projected out, around 1.4 million transactions a year.

Using an average transaction value of $1.50 (less than the current, saturated-market price of a knock-off Rolex) we’re in the range of US $2m in transactions involving counterfeit goods in Second Life every year. That’s quite a bit of money, but it isn’t that much that any individual business is leaving on the table. At least not yet. So why should a company care, right now?

Two reasons — one is legal, and the other is practical.

The first is a legal concern: trademark law requires that companies holding trademarks actively enforce those trademarks in the event of infringement; failure to do so can ultimately result in loss of registration for the marks. Moreover, the more trademark dilution is tolerated by a company, the harder it is to later argue that any particular infringer should be enjoined.

Trademark attorney Gregory Guillot explains: “When marks are appropriated unlawfully by unlicensed third parties, consumers are likely to become confused regarding the source or origin of goods or services. Trademark owners should take steps to discover, and prosecute, adverse users. A trademark owner’s failure to prosecute known infringers of a mark, may result in a finding of abandonment of trademark rights.”

The second concern is more practical. Even though a company may not want to enter a virtual world right now, it is only prudent to protect the option.

Some people (including this author) believe that having a virtual world presence will soon be as normal as having a web address. That opinion is no longer just out on the fringes, either. This week’s biggest virtual world news story was Gartner’s prediction that 80% of internet users will have some sort of virtual world presence by the year 2011.

Sure, even if the metaverse evangelists are right, that doesn’t mean a company has to move into this space today. On the other hand, smart companies will at least pay attention to what’s going on here, and should move to keep others out of their future virtual space. It will be much harder for a business to distinguish itself when it does decide to move into a virtual world if it is competing against hundreds of established knock-off vendors.

Second Life designer Linden Lab’s official policy (registration required) on trademark infringement addresses this question as follows:

Linden staff generally removes content that uses trademarks without apparent authorization, with or without giving notice to the object owner. This generally includes all RL corporate logos and brand names.

It is often difficult to tell what may or may not be trademarked. However, use of designer logos and brand names without permission, such as Gucci, Nike, Louis Vuiton, etc., are usually not acceptable.

Linden Lab has a well-deserved reputation for respecting intellectual property. Obviously, it doesn’t support trademark infringement. But it is equally as obvious that the explosive growth of Second Life has overwhelmed Linden Lab’s ability to devote sufficient resources — likely any resources — to this issue. Consider that the list of examples of marks that are “usually not acceptable” matches the biggest subjects of infringement almost perfectly. This isn’t really a criticism of Linden Lab; in the real world, the government doesn’t police trademark usage on companies’ behalf either.

As in the case of real world trademark infringement, it is up to the officers of concerned companies themselves to take steps to protect their companies’ intellectual property in virtual worlds. And it is this author’s opinion that businesses will need to begin paying close attention to the problem of trademark infringement in virtual spaces much sooner than they think, if they wish to avoid legal and practical difficulties later.

[...] Why do I think these are ideas whose time has really come? Yesterday I attended a discussion at Literature Alive! about Creative Commons Licenses, and breach of copyright which expanded to include citing and plagiarism in SL. When I got up today, I found an article about infringing trademarks over on Virtually Blind which says that “Nike” is the obvious trademark most infringed in SL, and estimates that 1-5% of the SL economy is working with goods that are infringing trademarks. If you add in items which break copyright, I suspect that number rises to over 50% of transactions are blurring, bending or breaking one or intellectual property rights law. That’s over $&frac34;million per DAY of illegal goods swapping hands. [...]

Obviously, I agree. Practitioners out there, take note. If I weren’t on sabbatical from practice at the moment, I would be actively seeking to represent these companies. I’ve rarely seen a situation that is this big, and yet completely under the radar of the companies who are being victimized. When my sabbatical ends (or when I get this book done) I expect to focus some part of my practice on this issue.

Unfortunately, I’m more of a freedom of IP person as opposed to a clamping down on the use of IP. The totality of branding is such a new concept relative to the concept of copyright and trademark as a whole, that the brand has become more important than the consumer. If I purchase a ‘Nike shoe’ in SL, it is not similar to a shoe purchased at Niketown. Nike is not harmed by a SL ‘Nike shoe’ when they do not create ‘Nike shoes’. Granted, if Nike decides to go into SL and make ‘Nike shoes’, there might be issues to senior use, but that’s an issue Nike could easily win in any court.

The point is, a Nike shoe produced by someone else is illegal in the real world because of trademark dilution, unfair competition, passing off and loss sales (maybe). A ‘nike shoe’ does not affect any of those things except through trademark dilution. And even then, the reasonable consumer in SL has to know that the ‘nike shoe’ that they are purchasing is not in anyway related to the Nike shoe’s they buy at Niketown. But the courts, as typified by Judge Posner, suggest that any slight confusion is enough to warrant infringement.

Here is what I suggest to those RL companies that want to block trademark infringement because there’s a shoe with your swoosh. Look at it in the same vein as fan fiction. Yes, you have an absolute right to block it, but its free good will for your brand.

Jessica – thanks for the comment. Obviously, you and I disagree on this, but you make good points. For what it’s worth, my position on this is evolving. I used to be much closer to where you are, but especially as I work on my novel and pour a lot of time into writing here, I find that I am becoming much more of a hard-liner about IP rights.

Regarding the business of law, I’ll just say this (which I think you acknowledge): right or wrong, the current state of trademark law is much closer to Posner’s view than yours. So philosophy aside, companies who ignore the vendors that are selling what appear to be “their” goods in world are playing with fire.

There’s also an argument that Nike is actually hurt by all of this, even if they aren’t losing sales. Some of the places that sell knock-off “Nikes” in-world also sell porn on the next display, some of them show the shoes next to arguably illegal gaming machines, and some just make flat-out hideous footwear. All of these things can reasonably lead to consumers thinking less of the real Nike shoe company.

I don’t know if trademark infringements go to jury trials or not. If they do and I were on the jury, I must say I find myself remarkably unconvinced by any of these arguments Benjamin, except, maybe, the last one.

I’m not sure how being sold next to an “arguably illegal gaming machine” hurts the company image, and given the preponderance of “sex sells” advertising campaigns, you’d find it hard to convince me that being sold next to a machine that sells porn does it harm. RL experiences also bias me.

Perhaps being a liberal European has some effect here: slot machines are licensed over here, but in no way illegal in most places, so I don’t have any sense of approbrium with them. I can go to a specialist sports shop and be bombarded by pictures of nearly naked women, and increasingly by pictures of actually naked men holding towels or water bottle or similar in a strategic position, whilst buying my shoes. I can buy Nike shoes in my local supermarket and in one of them buy pornographic “top-shelf” magazines on the next aisle over.

The “flat-out hideous” defence is only a maybe, because enough big name manufacturers make items I consider flat-out hideous anyway that you’d have to convince me it was actually damaging. Flat-out hideous is a matter of personal taste – being in my 40′s I often look at shoes worn by late-teens and wonder what on earth possessed them to strap those monstrosities to their feet. I’m sure they think something similar of my footwear.

I still think we’ll see the lawyers, possibly including you, getting up in arms about trademark infringements sometime soon. I, for one, would welcome seeing it so there are some precedents set up to make things clear. I’m just not convinced you’ve got arguments I’d buy lined up yet.

“Trademark law is designed to fulfill the public policy objective of consumer protection, by preventing the public from being misled as to the origin or quality of a product or service. By identifying the commercial source of products and services, trademarks facilitate identification of products and services which meet the expectations of consumers as to quality and other characteristics. Trademarks may also serve as an incentive for manufacturers, providers or suppliers to consistently provide quality products or services in order to maintain their business reputation.”

In sum, whether it’s actually a big deal or not, Nike gets to pick whether it puts its products on a rack next to porn magazines. Not Joe Schmuckmeyer with his $9.95 monthly SL account.

One more idea I’m playing with is this: a brand ought to be able to *not* be in the virtual space at all, if it so desires. Just as Gucci chooses not to sell bags at K-Mart, it might choose not to sell them in Second Life — because it thinks it’s too techie, too ugly, targets the wrong user base, or whatever. That’s got to be Gucci’s call, in my mind.

[...] May 4th, 2007 Misappropriation of major corporations’ trademarks in-world is now so ubiquitous, so safe, and so immensely profitable, that it has become a wholly transparent part of the Second Life commercial landscape. [...]

Personally as a store owner in Second Life (or SL), I try to watch the buying and selling of brand name items in the commerce sector.

I don’t sell virtual nike reproductions, or indeed reproductions of anything in that vein, but where I see the line personally is in a direct misrepresentation capacity.

If you’re saying “Hi We’re nike, buy these nike shoes.” Then you are certainly violating some law my misrepresenting yourself and your products in the entirety.

However if you’re selling nike-”inspired” shoes, and its *clearly* delineated that nike is *not* behind these shoes and that you are clearly *not* nike, then I don’t think there is a problem with selling said merchandise because you are diluting nothing of the brand and are making a clear distinction that this is in fact your creation, not nike’s and its merely based on a real shoe.

Moreover at that point, you have clearly indicated that you, as seller, are not Nike. You have disclosed that you are a fan of their products and give them otherwise some good publicity of their products and generate an interest in actual Nike products in the real world.

Lastly you’re not depriving Nike of anything at this point because they did not come in and build the shoe virtually. You didn’t clone anything they made in world, and you clearly said you are not them. So I have a hard time at that point believing that anyone would confuse an in game version of anything with the actual company mentioned, simply due to the fact that you have disclosed that you are making a product that is inspired by a real world product or company.

A good example of this is in the perfume industry. Many company’s sell perfumes which is exactly the same formula as an actual designer perfume but made under a different name branding such as “If you like this brand, you’ll love our brand”

These products exist everyday in the marketplace and incorporate a major brand into their packaging and naming scheme’s. Personally if anything happens, I think that this is the way to go to solve it. Allow people to be creative and have expression as long as its clearly delineated that you are not the seller.

“If you like Nike’s, You’ll love Neka’s” or “The Nike Air Jam Collection by So and So” or “The Neka, inspired by Nike”

You could also clearly state this on a signpost in your store saying you are not nike, and please don’t be confused that you are buying a legitimate nike copy from nike.

But to conclude, what really happens here is that people ar ebeing creative and sporting visual style of a brand they likely already support. There is no physical object trading places that can be picked up and held in your hand or on your foot. IF people are running around SL with Nike’s on, then I’m pretty sure, if I’m inclined to even take notice of their shoes, that if I see a Nike swoosh, and I’m a Nike oriented buyer, I’d probably go and get a pair, and then check the Nike website to see if I can get some real world shoes ta boot.

The thing is, seeing a brand out there makes brand recognition easier for these companies without them having to do the work in the world, secondly it makes me want to go and get an actual look at the actual company’s products if an actual company exists. And in the end, I’m not unclear on whose product is whose, and who is an actual company with a physical real world product and who isn’t.

SO in the end, I don’t see their being damage to a brand by having an in-world incarnation of their product, but more for nicety and for clearness of who the seller and their affiliations are, the only thing I would recommend is letting users know that either you do or don’t represent a specific company so that the consumer can make an informed decision to buy from you or another designer or the actual company, should they decide to get into the market.

But if they don’t, then there is absotively no physical object being created by which you can attach a dollar value to. Only a virtual re-creation, that is solely the work of a builder or scripter based on something a brand might’ve done in the real world.

And so in that scenario, ninety nine percent of the work is being done by the store owner/builder and payment for creation of those items doesn’t seem unreasonable. So long, as the potential customer knows that you are the store owner and designer, not the brand itself, I don’t see there being a misrepresentation or harm to a brand in any way.

First, your point about differentiated brands (“If you like Timberland, you’ll love SLimberland!”) is dead on. The doctrine that protects this kind of branding is called “nominative use” (or “nominative fair use.”) Note that it’s not carte blanche to say whatever one wants, there are restrictions, including using only so much of the mark as necessary (you can use the word “McDonald’s,” but not the golden arches), and making sure you don’t suggest a sponsorship relationship.

In my survey of brand usage for this article, I found a little bit of nominative use, but not nearly as much as I’d have liked to.

As to your other point, I think you hit on something really important here: there’s an approach where a trademark holder can work with the in-world infringers to create a win-win outcome.

An aside: Lawyers often leap right to litigation. It is often a big mistake and it can do a client a real disservice. Our primary role should be to provide counsel. Sometimes that means moving to litigation, but often it does not. With trademark matters, judicious use of lawsuits is even more important, simply because they tend to be very expensive.

About the same time you posted your comment, I got a very thoughtful email from a marketing professional who is working in virtual world spaces. He views infringers as a massive, volunteer, unpaid sales force that, handled carefully, he can leverage when a client moves into a virtual space.

Between your comment and his email, I draw this conclusion: Litigation is the “stick” if an infringing producer or storefront won’t play nice, but in a lot of cases, it shouldn’t be necessary. Approached correctly, using a relationship with the real brand as the “carrot,” infringers may become allies of the official brand, and perhaps even join the brand when does moves in to the virtual world, handling production or sales.

None of this changes the fact that trademark infringement is out of control in Second Life, but it should give companies some hope for a positive outcome to the problem, once they do start paying closer attention.

Quick update – In my incoming links yesterday, I discovered an link from Tony Walsh over at Clickable Culture that also linked back to an article he wrote in 2005 that predicts this problem. It’s worth a read for the historical perspective. Back in 2005, Walsh wrote, “Most corporations and artists aren’t aware they’re being ripped off. Ignorance is bliss, but for how long?” Apparently the answer is, “at least a couple of years.”

As a Developer in THERE (http://www.there.com/), we have to deal with copyright/texture theft quite a bit, but at least THERE has a submission review process that catches a lot of such — although things have been known to slip by at times, the people at THERE are very quick to remove such from auctions.

THERE had a marketing agreeement in the past with Levi and Nike and although these items are no longer sold in the THERE SHOP, you can still acquire these in the after-market auctions. I have several pairs of Nike shoes and Levi jeans in THERE, so, at some point in the past, these companies DID have a marketing relationship with this virtual world.

Ben, doesn’t trademark law require that there be a possibility for customer confusion? Does anyone who buys an assortment of pixels in Second Life really think they’re buying a real purse? I’m not sure it falls under the same set of law.

Perhaps that’s a little weak, but it’s worth examining how “customer confusion” will play in a virtual world where everything is understood (one would hope) to not be real.

Here’s a more compelling litigation prospect for you:

Misappropriation of name or likeness. The Herald ran a story a few months back about a store that sells celebrity avatars. They post up a big billboard of Scarlett Johannsen, for example, and then post an avatar image side by side, and say “BUY OUR SCARLETT JOHANNSEN AVATAR!”

Thanks for the comment, Petey. A couple of things. First, you’re right that TM law is all derived from customer confusion. Since there *are* real companies in SL though (e.g. Toyota, American Apparel, etc.) there’s good reason to fear brand confusion already, and that will just get more likely going forward.

As for your other point, celebrity avatars are definitely an issue (take a look at this post VB ran earlier). It’s a different IP right (right of publicity) in play for those though, and I don’t think it’s as likely to attract press attention as trademark or copyright issues (though with the celebrity angle, I could certainly be wrong there… if Scarlett’s lawyer sues somebody in SL, that *will* be news).

[...] People are starting to talk about the trademark issues associated with gaming and virtual reality: Linden Lab has a well-deserved reputation for respecting intellectual property. Obviously, it doesn’t support trademark infringement. But it is equally as obvious that the explosive growth of Second Life has overwhelmed Linden Lab’s ability to devote sufficient resources — likely any resources — to this issue. Consider that the list of examples of marks that are “usually not acceptable” matches the biggest subjects of infringement almost perfectly. This isn’t really a criticism of Linden Lab; in the real world, the government doesn’t police trademark usage on companies’ behalf either.As in the case of real world trademark infringement, it is up to the officers of concerned companies themselves to take steps to protect their companies’ intellectual property in virtual worlds. And it is this author’s opinion that businesses will need to begin paying close attention to the problem of trademark infringement in virtual spaces much sooner than they think, if they wish to avoid legal and practical difficulties later. [...]

How exactly does 1-5% qualify as “rampant”, i.e., “profusely widespread”? And by what methodology do you claim trademark infringement is “so immensely profitable”? It doesn’t follow that just because some content creators are listing existing trademarks in the Search mechanism that these items are necessarily selling. Indeed, most of the top content creators seem to be fashion designers who sell their own trademarked clothing/skins/etc.

Hi Hamlet – Thanks for the comments. I’m sure everyone here is already familiar with Hamlet’s site, New World Notes, but on the off chance that you’re not, do visit. Hamlet’s site has long been at the top of my list of places to find out what good stuff is going on in Second Life, from cool builds, to interesting speakers, to great designers, to RL/SL crossover. It’s well worth your visit.

To the comments. As an initial matter, I find that quibbling over dictionary definitions of words (particularly in headlines, where you’re looking for something that expresses a complicated thought using a minimum number of potent words) is pretty rarely productive. That’s especially true when there are hard numbers and philosophical arguments out there to hash over. But for what it’s worth, I do stand by both “rampant” and “immensely profitable.”

This gets into a “how the sausage is made” sort of discussion, but a few readers may be interested, so I’ll go into it. I actually looked the word “rampant” up because I had the same concern that Hamlet expressed here when it first popped into my mind. The definition that I hit first was “extending unchecked; unrestrained.” The second was “occurring without restraint and frequently.” (These are American Heritage Dictionary definitions, served by Answers.com). Given the sheer number of incidents I found and the fact that business isn’t zeroed in on this yet, I’d say that “extending unchecked, without restraint, and frequently,” applies pretty well. The word really refers more to the unchecked nature of a thing (e.g. “rampant growth,” “rampant speculation,”) than it acts as a synonym for “profusely widespread.”

As for profitability, whether something is “immensely profitable” is a question of cost v. benefit. There’s currently zero “cost” associated with appropriating a trademark (if there were licensing, that would not be true) while there’s at least enough “benefit” to make “Nike” a search term that people load as a keyword to drive customers to their in-world stores — in ads that they have to pay for. Again, I stand by the phrase, though again, I have to say that I feel like the question sort of misses the forest for the trees.

As to Hamlet’s last point, I think we’re in complete agreement. The work of the most widely recognized content creators is original, non-infringing, and in many cases, really impressive. That fact is definitely worth pointing out, and blogs like New World Notes do a great job showcasing the work of those sorts of designers. I don’t see how that really would fit in this piece, but for what it’s worth, my discussion of the widespread problem of trademark infringement in no way should be taken to imply that original designers — some actually working under their own trademarks — aren’t doing some truly amazing work. They unquestionably are.

[...] On the heels of my recent entry about the non-liability a web publisher regarding libelous content posted to that site by a third person, I saw a great entry today about how virtual worlds are rife with trademark abuse. [...]

I appreciate the compliments. This issue is crucial to me, because historically it’s dangerous to make broad statements about infringing activity, especially in relation to user-created content. YouTube is currently suffering from this overreaction, pulling videos which include copyrighted/trademarked content, even though at least some of them fall under fair use. Perfect example involves SL, actually:

Both definitions applied here are highly debatable, in my opinion. Especially if it turns out that the definition of “immensely profitable” really just refers to the zero cost of creating items in SL. Anecdotally I’m hard pressed to think of any content creators that have made a large profit from blatant, direct trademark infringement. In my observation, most trademark infringement in SL is motivated not by a desire for ill-gained profit, but by *fans of the trademark*.

A couple of points, then I’ll step back and let others have the last word on this, since I don’t want to be in the middle of a big debate in my comments, and because I do have a lot of respect for different opinions on this.

But I have to say this: I think Hamlet and I are talking about two wildly different things here, and I think it’s bad for the virtual world to conflate them.

Riffing on pop politics in a freely distributed not-for-profit machinima parody is completely different — both legally and ethically — than selling, for profit, unlicensed versions of a company’s products.

I’m not talking about a gray area here. I’m not talking about political commentary, or parody, or borderline copyright calls — I’m talking about a guy in Okalahoma making fake Gucci bags and selling them for money. Sure, the bags are “virtual,” but if you take virtual worlds seriously, that better mean pretty much nothing.

There’s two ways to see this. One is that a virtual bag is exactly the same product as a real bag, so it’s a straight-up knock-off. That’s a slightly harder sell, but I think it’s a reasonable position to take, and one we will certainly see companies taking. The other (even easier to defend) position is that a virtual bag is simply a product that Gucci chooses not to sell. Just like they don’t sell Gucci fishing lures or tires. That gives them somewhat less ability to restrict the use, but if the mark is “well known,” as Gucci’s, Nike’s, etc. are, they can prevent the use, even in dissimilar product lines.

So at absolute minimum, I think there is an excellent argument that the guy who is making Gucci bags in Second Life without paying for the logo, brand identity, and corporate goodwill is violating Gucci’s intellectual property rights at least in exactly in the same way, and just as much, as if he was making and selling “Gucci” branded fishing lures, tires, or software in the real world. Maybe it’s not the same as making and selling a Gucci bag in the real world (though that’s fairly up for argument) but it is certainly at least the same as making and selling real world toasters with the Gucci logo on them.

If you don’t believe at least that much, then you better take the position that virtual worlds are just games, and what people make in here doesn’t matter. But it can’t be both ways — either people doing cool new design work and developing their own brands in world are just wasting their time playing with a toy that means nothing, or else we have to take infringement here just as seriously as we take original content creation.

I’m 100% behind efforts to keep false claims of intellectual property infringement in check. I feel that keeping the system honest and free of gamesmanship (e.g. DMCA abuses) is absolutely critical to the future of IP rights. But it’s entirely possible to go the other way too far as well, and that’s pretty dangerous too.

I think that minimizing the problem, or comparing it to much more ambiguous parody/free speech issues, does content creators (and not just Gucci, but the little guys who are creating new brands both in the real world and in virtual worlds) a huge disservice.

And I don’t think I’m on the fringes here. I’m being straightforward about the percentages and numbers in this article, and in fact, I’m probably underestimating the problem a bit in order to avoid being on the fringes (one blog that linked to this piece in the first comment above estimates that between copyright and trademark violations, the world is pushing 50% — I think that’s somewhat high, but it puts my numbers in perspective).

Anyway, I’ll back out of this debate now, and let readers who are interested in continuing it on either side carry it forward. No matter how individual readers come down on the issue, I’m glad it is sparking so much thought, and I welcome all readers who have come to the site via this thread.

“Since there *are* real companies in SL though (e.g. Toyota, American Apparel, etc.) there’s good reason to fear brand confusion already, and that will just get more likely going forward.”

Well, here’s my analogy:

If I were to mspaint you an image of a gucci bag, and ask you to buy this “gucci” for $10, and you did so, would I have committed infringement?

Don’t get me wrong. I think Second Life being hit with a giant crippling lawsuit is inevitable, and frankly I think Linden Labs deserves it.

That said, I guess I’m not convinced that a couple of polygons representing a gucci bag is the same as selling a real bag and calling it a gucci.

Now, if I were Gucci’s lawyer, what I would argue is that the association between any representation of a bag or leather product labeled Gucci and high value is the product of Gucci’s marketing and therefore they own an expansive trademark on any and all items labeled gucci that could bring to mind a product of their marketing. But that’s a little to expansive for my tastes.

As the legal discussions drone on and on, it would be interesting to know how much of this becomes increasingly irrelevant to the real world as more and more people ‘throw in with the criminals’ and decide that violating the ever-mounting hurdles put up by governments and the law industry are their real ‘enemy’. What good does law do, when the common belief is that the world would be better off without laws and the legal establishment that profits from them?

[...] Commenter Benjamin Duranske put us onto his great article on trademark infringement in SL. It may seem that these knockoffs are harmless; it’s all in good fun, right? Nobody really believes that they’re receiving anything like the real deal, it’s just a crafted object. Yet that object is trading off the cachet of its RL progenitor, so if nobody cared about such things, nobody would bother to buy these copies. [...]

[...] One key issue is the prevalence of virtual trademark infringement. It may seem like a non-issue, but from virtual items to software distribution, it may have both a monetary as well as legal impact on the companies in question. With an estimated 1.4 million transactions in Second Life alone per year, it may create a two-fold problem. First, with the real monetary exchange between virtual currency and real-world dollars, there is definitely money to be made that the company is losing to the trademark users. The second issue may have much larger legal ramifications: companies who fail to diligently protect their trademark are in danger of using it. The proliferation of virtual trademarked goods may be considered a dilution of a company’s trademark. If a brand becomes common enough outside of a company’s own use, the trademark is lost, much like thermos or aspirin were. [...]

I tend to agree with the marketeer who emailed you (comment #10, above), who said that these “infringements” are really a “massive, volunteer, unpaid sales force that, handled carefully, he can leverage when a client moves into a virtual space.”

From an economic/social viewpoint, the *value* of a trademark derives from it’s ubiquity — how well it penetrates the social consciousness. Therefore, it’s natural that people who could, in theory, create *anything* they wanted, choose to create and buy virtual objects associated with well-known brands. It’s a reflection and consequence of the value of these brands.

As I understand it, trademark law focuses on protection and control. That may yield economic and social value in real life, but in virtual worlds the control-oriented strategy is counter-productive. It goes against the massive social momentum toward “user-created content”. This is happening all over cyberspace — fan sites, remixed music, homebrew video, and the rest. “User created content” has permanently changed the economic/social/political/technical dynamics. Legal systems need to catch up.

I believe in the possibility of a “win-win” future, where trademarks and similiar IP will be seen as *co-creations” and “collaborations” between originators and their social/commercial networks. As such, gain-sharing and other incentive systems should be the dominant forces that guide behavior and govern rights, supported by standard contracts. Furthermore, I believe that the virtual world norms will come to the dominate real world, too. With RFID chips being put into almost everything, incl. branded goods, the virtual world is becoming pervasive and more and more IP is becoming virtual.

I’m not a lawyer, but if I were advising major consumer trademark owners, I’d advise them to create and sell “SL developer’s kits” or something like it. Such a kit would provide aid to anyone in SL who wants to build or sell something involving the brand — Clip art, product specs, web links, etc. It could also include some mutually beneficial “digital rights” scripts that provide info back to the trademark owner.

Obviously, this will require a big shift in IP law. The best hope is that people use SL and other virtual worlds as experimental sandboxes for new IP regimes, rather than simply apply current IP law in a ham-handed fashion or to push for real-world legislation (i.e. DMCA) before we know what works and what doesn’t.

In other words, trademark owners should focus on making it easy for people in virtual worlds to do good things with your brand, rather than trying to control everyone by carpet-bombing legal notices or police actions.

[...] To put this in perspective, when VB covered widespread trademark abuse in Second Life last month, the most expensive single infringing item I found for sale was a virtual Ferrari selling for about US $7.75. My prediction? Luxury goods selling at relatively high prices will turn into a trend, and that will make it much more likely that a real world company will take action to protect its trademarks in world. [...]

[...] Despite the much ballyhooed hype of online economies in games, at the moment selling bootlegged replicas of meatspace items most likely isn’t going to make you enough money to buy a DeSadean underground sex and drug chamber. Hell, many businesses are pulling out as we speak. “Going into Second Life now is the equivalent of running a field marketing program in Iraq.” Getting out of the house and doing something productive in your First Life will not only get you around people without swords but will help get your bills caught up. And face it, if you’re an online game addict and you don’t have enough bling to play for your internet bills or game subscriptions, you’re fucked. And I’m not in the mood for any drama scenes right now, it’s way fucking hot out. [...]

[...] Trademark Infringement in Second Life Noticed Again – Digital Urban joins the ranks of bloggers singing the trademark infringement in Second Life song (originally a 2005 Tony Walsh hit, remixed by VB last Spring). My prediction? Lawsuit in 2008 — though I suppose I waive any prognostication points if I file it. [...]

What a fascinating commentary. While not a question of trademarking, I’ve been thinking about the number of SL clubs and businesses that revolve around music and video.

Do SL nightclubs require the same licenses as RL nightclubs?

And, would an SL DJ have to secure a webcasting license?

In RL, the club DJ is covered, for the most part, by the club ownder’s ASCAP/BMI license. But in SL, the DJ is, in effect, creating a webstream…an online radio station…to feed his clients’ virtual spaces.

Having checked the fees involved with those license requirements…the amount of money at stake for licensing agencies seems rather substantial.

I am in the process of doing a project and am looking into Virtual Worlds. Can you please explain what the legal restrictions and limitations are if any in real life as I do not fully understand this area. I have checked several websites but am not able to find a conclusive answer.

Please email me back the reply as soon as possible as I am stretched for time on this project.

@33 – Harjinder, unfortunately, there’s no easy answer to that. It would make my life easier if there was! This site (Virtually Blind), Terra Nova, Law of the Game, Law X.0, and others will point you in the right direction, but it sounds to me like you are going to have to do some original thinking and come up with your own analysis here. It’s basically the question we’re all trying to answer right now, so I hope you share your results. Best of luck with the project.

[...] disputes. The freedom that users have to create virtual assets makes it as easy for them to create and sell infringing items as it is to create original non-infringing items. It’s equally simple for users to create [...]

I teach a university course called Information Technology: Security, Privacy and Ethics. My comparative research investigates the attitudes and perceptions of university students regarding software, music and other IP piracy issues. As a result of the comments on this topic, I plan to include the area of trademark infringement in the context of virtual worlds the next time I offer the course. As an educator (and former practicing attorney), I want to thank you for bringing this issue to our attention!

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About Virtually Blind

From early 2007 to late 2008, Virtually Blind covered legal news, issues, and events that impact virtual worlds, video games, and the 3D internet. The site is no longer updated, though it remains online as a research resource.

Posts and comments on VB were and are not offered as legal advice, and are not confidential attorney-client communication. Posts and comments reflect only the opinion of the author, and do not necessarily represent the opinion of VB's editor, other contributors, sponsors, or any author's employer.